Core Consumer Inflation Remains Low

The Bureau of Labor Statistics said that consumer prices rose 0.2 percent in September, moving higher on increased energy costs. This figure suggests very modest growth in inflation overall, with food costs unchanged for the month. Yet, energy prices were up 0.8 percent in September, rebounding from the 0.3 percent decline in August. This was largely due a jump in gasoline costs. Indeed, the price of West Texas intermediate crude oil rose from an average of $95.77 per barrel in June to averages of $106.57 and $106.29, respectively, in August and September. As we ended October, crude oil costs had fallen more to levels closer to the June average.

Outside of food and energy, components with the greatest monthly price increases included shelter expenses for renters and owners, medical care services, transportation services, and tobacco. At the same time, declining prices were observed for apparel, alcoholic beverages, and recreational activities.

Overall, consumer prices have continued to decelerate on an annualized basis, down from 2.0 percent year-over-year in July to 1.5 percent in August to 1.2 percent in September. Excluding food and energy, core inflation is currently 1.7 percent, edging down from 1.8 percent the month before.

The significance of this figure is that core inflation remains below 2.0 percent – the target set by the Federal Reserve Board. Core consumer prices have not exceeded the 2.0 percent annualized rate since July 2012. This frees the Fed to pursue accommodative policies to stimulate growth.

Chad Moutray is the chief economist, National Association of Manufacturers.

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.